excess property than they would if the property could be brought into the United States.

It is the taxpayers who suffer when Government surplus property is disposed of for less than the best price obtainable. Nevertheless, the restrictive policies of the Department of Commerce will inevitably cause this loss of revenue to the Government. When American firms bid on property in foreign surplus disposals, this participation leads to higher bids and increased revenues. In many cases the ingenuity of American importers in devising uses for surplus items enables the Government to obtain a price substantially higher than the salvage value which would otherwise be obtained. A further increase in revenue occurs subsequently when other importers bid on the same kind of property to imitate the achievements of the original ingenious importer. Where American firms cannot import foreign excess property, they are not able to bid as much on the property and the surplus is sold at substantially lower prices. A vivid example of this is found in the testimony of Mr. Ellis before the Dawson committee. A May 25, 1959, bid opening by the Army Properties Disposal Sales Agency in Yokohama, resulted in rejection of the Ellis Co.'s high bid, because in previous sales, when the bidders were able to import the property, they had bid almost twice as much for the same items. This artificial barrier to the obtaining of maximum prices severely burdens the Department of Defense-and the taxpayers-in the management and disposal of property. Indeed, the Department of Commerce told the Dawson committee in 1958 that the Department of Defense had made "strong representations" against the restrictions on importation of surplus which "had the effect of injuring their disposal programs," and had recommended changes in the law to permit broader importation.

(2) A second advantage, which I have already discussed, is the fact that availability of surplus material generates a substantial amount of additional economic and business activity which otherwise would be lost to the economy.

(3) Third, enactment of S. 3154 would result in keeping vitally needed equipment in the United States instead of allowing foreign interests to buy them at low prices. The Dawson committee hearings revealed numerous instances in which the embargo policies of the Department of Commerce under the present regulation resulted in the sale of equipment to foreign competitors at a time when the equipment was desperately needed by American firms. Let me give you two examples:

Green Truck Sales, Inc., was forced to sell a number of Lima type 802 cranes which it was holding in bond in Los Angeles to a Dutch purchaser at a time when the shortage of such items was so great that none was available anywhere in the State of California.

Edward Levy Metals Co., of New Orleans, was denied the opportunity to import 236 pieces of scrap nickel alloy steel recovered in demolishing dams in Panama which it wanted to use in manufacture of a hydraulic shear in the United States, an operation which would have required 10,000 man-hours of labor and $50,000 worth of materials. At the time the application was denied by the FEPO, substantial quantities of foreign steel (nonsurplus) were being imported. The surplus steel in question finally was shipped to Japan and the company imported a German hydraulic shear costing $125,000-a substantial loss to the domestic economy.

(4) Another detriment to the national economy in the present shortsighted policy of the Department of Commerce is found in the fact that the embargo on importation of surplus automotive parts is enabling foreign buyers to acquire surplus U.S. automotive parts at very low prices and to sell these abroad in competition with exports from the United States. In this respect, this misguided policy is killing the U.S. export market for automotive parts and is actually injuring the manufacturers.

(5) Ending the present restrictive policy of the Department of Commerce would contribute to the national economy in other ways. At the present time, the economy loses the economic use and value of otherwise good and useful equipment as soon as it becomes surplus. This is analogous to destroying an automobile when its first owner wants to dispose of it, ignoring its potential useful life to others. Such a policy is obviously economically wasteful and sinful.

In conclusion, Mr. Chairman, let me once again express my appreciation, and that of our association, for your courtesy in hearing our testimony and recommendations. We trust that your subcommittee will favorably report S. 3154.

Senator GRUENING. IS Mr. Robert Nathan here?
Mr. NATHAN. Yes, sir.

Senator GRUENING. Mr. Nathan, we are very happy to have you here.

Mr. NATHAN. Thank you, sir.

Mr. Chairman, I too have a prepared statement which is rather lengthy. I would appreciate very much if this were introduced into the record as presented, and then I could take a very few moments to just touch on some of the highlights of this statement.

Senator GRUENING. It will appear in the record as presented, and we will also be glad to have your highlights.

STATEMENT OF ROBERT R. NATHAN, CONSULTING ECONOMIST, AMERICAN ASSOCIATION OF SURPLUS PROPERTY IMPORTERS, WASHINGTON, D.C.

Mr. NATHAN. Thank you, Mr. Chairman.

I appear as an economist on behalf of the American Association of Surplus Property Importers, and want to confine my remarks to what I regard as the pertinent economic aspects of this measure. I can summarize these very briefly in the following points.

First of all, it seems to me, Mr. Chairman, that we in our society are concerned in our economic life with the production of goods and services to satisfy our needs and our wants and our desires. And I think basically that to preclude the possibility of utilizing what we produce to the maximum extent to benefit our people and to satisfy their wants is highly undesirable and highly unsatisfactory and highly uneconomic.

Basically, to preclude the import of products which were produced in the United States, paid for by our people through taxation or in moneys of the Government, during the war especially, and in terms of deficits and increase in our public debt, to have these articles produced by our own funds and our own efforts and our own machinery and our own raw materials and then somehow to seek to make them unavailable for satisfying the needs of our people, in my judgment, Mr. Chairman, represents basically a very serious waste and a very uneconomic concept.

We move, then, to the problem of whether or not the availability of these goods, making them available for meeting the needs of our people, would disrupt our economy. And this is a good question. And in approaching this question, I would like to say, Mr. Chairman, that almost every economist agrees that we have tremendous unsatisfied wants in our society, tremendous unsatisfied needs-we have reached a $500 billion level of production in our society and our economy, and this is magnificent and we are very proud of it. But as we project it we are thinking 10 years from now, we will be having a $700 billion or $800 billion economy. And these are not wild projections.

As a matter of fact, in New York just a few days ago, at a meeting of the National Industrial Conference Board, which is regarded as a quite conservative organization, there was pretty general acceptance of the fact that a gross national product of something in the magnitude of $800 billion a decade hence was entirely feasible, and likely, and desirable. Now, this increase in production is not going to in

crease the volume of goods and services to be thrown away. There are needs for these goods and services. We have phenomenal unsatisfied wants in this country. There are still 8 million families in the United States who earn less than $2,000 a year. This was reconfirmed recently in census reports.

We have tremendous unsatisfied wants in the public service area, in our schools, in our hospitals, the needs for urban redevelopment to eliminate our slums and clear the blighted areas in almost every city in the United States, our needs for highways and roads, let alone our needs for continued and enlarged, perhaps, defense efforts.

So that, fundamentally, the problem in our economy is not overproduction; it is not that we have excess supplies relative to what we need or want. Now, it may be that we have inefficiencies in our distribution system. We do have recurring breakdowns; we do have recessions; and in the earlier history of this country we have had depressions. But these are imperfections in our system of distribution of income and our system of use of our income and our whole distribution process.

But, fundamentally, I think we must recognize, Mr. Chairman, that ours is a society, as affluent as it is, where there are still tremendous unsatisfied demands, and that is why the drive to produce more, the drive to increase productivity, the drive to increase efficiency, the drive to automation is desirable. We want to make possible the availability of goods and services for our people in increased amounts, and therefore I emphasize very importantly that our problem is not overproduction; our problem is underconsumption in practically every And this is the problem of how we distribute our income and

our goods.

Now, fundamentally, the thrust of this original law was to preclude the import of these surpluses sold abroad, unless they were proven detrimental, or to bring them in if they could be beneficial to the economy.

I do not want to go into details, except to say this, Mr. Chairman, that as this law, passed in 1949, was interpreted progressively over the years and each tightening, by the way, seemed to come with a recession when we did have overcapacity because of a breakdown in our distribution processes there was a tightening up to a point where, in the past year, I do not think it is an exaggeration to say that, for all intents and purposes, we might just as well have precluded the import of surplus products entirely and it would not have made much difference. There was a little that came in here and little bit there.

I think that this interpretation has been entirely and totally uneconomic. If one were to go back, Mr. Chairman-and you will see it in my testimony where I go through the criteria which were adopted by the Department of Commerce in interpreting the law— I think these criteria were extremely uneconomic, extremely unreasonable, and, in effect, practically precluded the import of these goods. As an economist, I object very, very strenuously to the kind of interpretations. For instance, they said the price concept should not be considered.

Now, if goods come in at a low price because they are surplus-we all know that there are many people in our society and many busi

nessmen who cannot afford new equipment, and that is why we have a used market at all times-when surplus products come in at even lower prices, this taps the market of those who cannot afford to pay for goods at higher prices. The price concept ought to be considered. For instance, the regulations, it seems to me, in a sense ignored what has been the basic thrust of economic policy of this administration for the last 8 years, and that is concern about inflation. We have had rising prices in the United States. Whether it is the greatest threat to our country or whether there are other considerations that should take higher priority is a debatable matter.

But, nonetheless, there has been tremendous concern in this country about the subject of inflation. If, in even small degree, the import of these surplus products which were produced in the United States and for which we paid and in whose production our workers and our plants devoted effort and machinery and equipment and raw materials if, in even small degree, this could contribute to antiinflationary policies, I think that these goods then ought to be brought

in.

Senator GRUENING. Mr. Nathan, let me ask you a question at that point.

Do you think that passage of this bill would tend to limit inflation? Mr. NATHAN. In some slight degree. I would say it is quite considerable; I would say it is a marginal kind of contribution, but it would certainly be of an anti-inflationary nature, sir.

Senator GRUENING. Then the administration should certainly favor it.

Mr. NATHAN. I should think that the administration should certainly favor it.

Senator GRUENING. It has spoken out very vigorously on the subject of inflation, though its actions have often belied its words.

Mr. NATHAN. I think this has been the President's and the administration's almost major concern in the economic area.

Senator GRUENING. What is your belief as to the attitude that the Department of Commerce would have toward this?

Mr. NATHAN. Well, the Department of Commerce has apparently not been opposed to this proposed legislation, but they did make these changes, or rather they did propose this minor amendment at the end, which I agree with Mr. Kampelman is highly undesirable; and that is, putting the burden of proof on the importer.

Senator GRUENING. As I interpret the picture, Mr. Nathan, the original legislation was not too bad; its provisions were flexible saying that, if these importations were really going to hurt our Nation's economy, then the surplus goods ought not to come in.

Mr. NATHAN. I have no objection to that. I think when you have a recession, in those periods it is all right. You are concerned mainly with reemployment quickly, and at those times you want to reestablish jobs and get business back to higher levels of production.

But as the years went by, the Department of Commerce interpreted these regulations, increasingly severe and increasingly strict, in my judgment, under the pressure of the manufacturers. They did not want imported surplus to come back in competition. But we live in a free competitive society. I do not think it is incorrect for a person to be concerned with his immediate business. If you can eliminate

your competition and have a larger market or larger share, this is, in a sense, part of the competitive drive, to try to gain a larger portion of the market, to try to eliminate the kind of competition one faces.

As I read the regulations and look at the picture, I think over the years the manufacturers of new equipment increasingly brought pressure on the Department of Commerce to preclude and restrict the importation of these goods, and they were successful. And I think the Department of Commerce went out of its way in its interpretation, contrary to the original legislative intent of the bill and contrary to the original practice.

That is why this legislation is before this committee now, Mr. Chairman. It is essential to try to clarify this so that regulations will not result in a precluding of these imports, which nobody admits that they want to fully preclude but which, in effect, due to the regulations, results.

That is why these regulations are necessary. I think we need a flexible system, Mr. Chairman, and I believe that was originally the need. I think that if the proposal which is before this committeeand the committee will take out this double negative business which puts the burden of proof on anybody who objects to it and base it on a finding that it hurts business-then I think that is the kind of legislation we should have.

For instance, if I may just take a moment to give an indication of some of the thinking that goes on in opposition to this, let me refer to testimony which occurred before the House committee. One witness stated that economists "all agree that the largest single factor" contributing to the three recessions since World War II "was excessive production," and as long as our productive capacity exceeds our power to consume, all foreign excess imports are injurious to the economy. Now, this I disagree with almost violently. I think that, as I said before, the problem of this economy is not excessive production. Excessive relative to what are the needs of our people? Nonsense. We have too many unsatisfied needs now.

The problem is that we are much broader than this. To try to restrictively-restrictively in successive ways-curtail availability of goods is certainly not the answer. The purpose ought to be to increase the buying power of people, to engage in governmental programs which will utilize our productive capacity, but not be restrictive, cutting back to the productive capacity.

Here is another illustration of testimony by those who are opposed to these imports. It is stated that it is "unfair" for the evidence burden to be on the dealer of equipment

in view of the fact that the importer is adding nothing to the economy of the country except his own profits, while creating a serious threat to an industry which is making a real and continuing contribution to its community and to the economic stability of the country.

Now, this is not too different from what the Department of Commerce regulations implied-that the import of these goods as such is not beneficial to the economy. I think this is a contribution to the economy. If you bring in tractors or if you bring in certain kinds of equipment that farmers can buy who cannot afford new equipment or even cannot afford some of the better grade used equipment and just